Beyond ‘greed is good’? This company wants to be the investment firm for the middle class

Aspiration’s chief executive Andrei Cherny has worked at the White House and investigating financial fraud.

By

MariaLaMagna

Reporter

Whether it’s the bank bailout, housing crisis or flash crash, financial institutions don’t have the best reputation these days, but this investment company is trying to move away from a “greed is good” approach and closer to a feel-good mentality.

Aspiration, which says it’s trying to help its customers make money while also making a difference, gives a portion of its revenue to charity and lets clients pay whatever fee they want on their investments — even if the fee is nothing.

The company’s message comes at a time when many Americans say they don’t trust banks, an industry known for trying to maximize revenue, much less give away 10% of it, as Aspiration is doing.

About 45% of Americans said they have “some” confidence in banks in a 2015 poll by the analytics company Gallup, and 26% said they have “very little” confidence or none at all. Gallup polled about 1,500 people in June 2015. The drop in confidence was pronounced between 2006 and 2009, coinciding with the U.S. financial crisis. About half of people said they trusted banks “a great deal” or “quite a lot” in 2004 to 2005, and that number fell to 22% in 2009 and hit a low of 21% in 2012.

Letting consumers pick their own fee is just part of the company’s mission: being “a financial firm with a conscience,” said its chief executive Andrei Cherny, a former speechwriter for Vice President Al Gore during the Clinton administration who also worked as the Assistant Attorney General in Arizona where he investigated financial fraud.

Courtesy of Aspiration

Aspiration’s website tries to appeal to investors with a conscience.

Los Angeles-based Aspiration is a for-profit company, and Cherny said about 90% of customers choose to pay a fee rather than electing to pay 0%, which he attributes to the strong relationship he thinks Aspiration creates with the customers. Many find out about the company through word of mouth and social media, he said. The company has invested in its Facebook presence and website and emphasizes that it donates 10% of revenue to charities that promote economic growth in the U.S.

“People at the end of the day are, for the most part, honest,” he said. “They have a sense of obligation and reciprocity.”

Cherny declined to specify the amount of assets Aspiration is managing, but said it has more than 20,000 customers since launching in fall 2014. The company raised $15.5 million from venture-capital firms and individual investors during summer 2015.

The average customer’s age is 33, and they range from 18 to 95, Cherny said.

On Aspiration’s Facebook page, individuals have left comments such as “This is the way for a sense of humanity to progress in a positive manner” and pro-environment messages, praising the idea of sustainable investments.

“There’s a real sense that (customers) are excited there’s a financial firm that is built for everyday people and for the middle class, and a feeling that the financial industry hasn’t worked for everyday people or shared their values,” Cherny said.

Customers must invest $500 minimum in the Redwood Fund or Flagship Fund, and both are open to new investors.

The Summit checking account requires a minimum opening deposit of $10 and pays 0.25% annual percentage yield for balances under $2,500 and 1.00% APY on balances that are more. Customers access their accounts with a debit card that they can use at any ATM in the U.S. or abroad, for no fee. If customers incur an ATM fee at any point, Aspiration reimburses them. It has no monthly service fee.

And Aspiration’s partner Radius Bank offers a checking account that offers up to a 1.0% APY on the portion of money in the account that is over $2,500.

Aspiration doesn’t offer a savings account or any loan products yet.

The Aspiration checking account does have some fees associated with it — customers who overdraw their accounts are charged $25, incoming domestic wire transfers cost $10 and outgoing domestic wire transfers cost $20. It also charges a $5 daily overdraft fee for accounts that remain in the negative.

Right now, it also doesn’t have a mobile app, which may be inconvenient for customers who like to access their accounts via apps on smartphones and tablets, but Cherny said the company is developing one that should premiere within a few weeks. And customers can’t set up accounts instantly; some reviews and comments on Aspiration’s Facebook page have said customers have waited weeks or more to be approved for the checking account after they signed up.

Cherny says once customers log on to the site and sign up, they should receive an invitation to join Aspiration within about a week, because the company only sends invites out in batches weekly. At that point, Aspiration will confirm a potential customer’s identity online, which should also be a fast process, unless for some reason there is a problem with the customer’s sign-up, or difficulty confirming their online identity, he said.

Still, Cherny says Aspiration caps third-party fees at 0.5%. If the company is unable to negotiate those fees to 0.5%, Aspiration covers them, and the customer does not pay them.

For consumers who are in the market to open a new checking account, it’s also important to consider companies with long histories of good customer service and conveniences like mobile apps, said Devan Goldstein, a banking expert at personal finance website NerdWallet, which ranks best checking accounts.

Aspiration ranked second on NerdWallet’s list of best accounts when ranked by interest rates, only behind Radius Bank, Aspiration’s partner.

Goldstein said to be aware of Aspiration’s overdraft fee, which is fairly high. (Several institutions charge more, including Chase Bank and Wells Fargo, which charge $34 and $35, respectively).

Interest rates are also subject to change, he said, so consumers should be aware that Aspiration’s rates could change in the future.

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